Over the past decade, a wealth of knowledge has been obtained concerning the mechanisms by which interferons and other cytokines activate or downregulate immediate early genes via the Jak/Stat pathway. However, little information is available on interferon-activated gene expression in naive cells compared to cells that have been desensitized and subsequently re-sensitized to the actions of these cytokines, thereby mimicking repeated interferon administration in a clinical setting. In naive cells, the ISG54 gene is activated via IFNaB-stimulated formation of ISGF3, a heterotrimeric DNA binding complex consisting of p48 (IRF9) and tyrosine-phosphorylated Stat1 and Stat2, which binds the Interferon Stimulated Response Element (ISRE). In contrast, in previously de-sensitized cells, IFNB weakly stimulates the assembly of an ISGF3-like complex that lacks tyrosine phosphorylated Stat1, even though ISG54 mRNA induction is the same as in naive cells. The lack of Stat1 tyrosine phosphorylation and DNA binding is due to increased activity of the protein tyrosine phosphatase Tc-PTP. Although IFNa/B stimulated formation of ISGF3 is decreased in previously desensitized cells, the ability of LPS or double stranded RNA to induce ISG54 expression, presumably through a TLR3- or TLR4-IRF3-dependent signaling pathway, is greatly enhanced. We hypothesize that the signaling pathways that regulate type 1 interferon (IFN(/() activation of ISRE-dependent early response genes are substantially different in cells that have been previously desensitized to this cytokine. Modification of the IFNB response impinges on the ability of other transcription factors regulated through ligands that bind to Toll receptors to regulate activation of ISG54. The altered responses in previously desensitized cells likely translates into changes in IFNa/B and Toll receptor-mediated responses in humans who are chronically treated with these cytokines. We will test this hypothesis by performing the following specific aims: 1) Determine the differential requirements for ISG54-induction in previously de-sensitized cells. 2) Determine the mechanisms by which Tc-PTP enhances dephosphorylation of Stat1 in previously desensitized cells.